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Accounting for the Wealth of Nations: The Net versus Gross Output Controversy and Its Ramifications

Charles R. Hulten
The Scandinavian Journal of Economics
Vol. 94, Supplement. Proceedings of a Symposium on Productivity Concepts and Measurement Problems: Welfare, Quality and Productivity in the Service Industries (1992), pp. S9-S24
Published by: Wiley on behalf of The Scandinavian Journal of Economics
DOI: 10.2307/3440242
Stable URL: http://www.jstor.org/stable/3440242
Page Count: 16
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Accounting for the Wealth of Nations: The Net versus Gross Output Controversy and Its Ramifications
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Abstract

There has been a longstanding controversy over the use of net versus gross measures of national product in accounting for economic growth, most recently reflected in several papers which have examined the role of environmental variables. It is argued in this paper that the two measures are not substitutes, but complements which reveal different aspects of the growth process: gross product is the correct output concept for estimating the structure of production, while net product is the correct concept for measuring the welfare consequences of economic growth. An alternative to the conventional Solow growth accounting framework is then presented in which the change in national wealth is decomposed into its component elements.

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